The Feasibility of Investment in Apartment in Mueang Rayong District, Rayong Province

Abstract

The objectives of this study were to study of explore the market feasibility, the technical feasibility and perform a financial feasibility for assessment of the investment in the apartment construction at Mueng Rayong District of Rayong Province. The study utilized primary data by non-participant observation and in-depth interviews, and used secondary data from articles and research papers by analyzing descriptive and quantitative data through financial tools. The results of the market feasibility study showed that the apartments were developed near several industrial estates such as Map Ta Phut Industrial Estate, Pha Daeng Industrial Estate, and WHA Eastern Industrial Estate. The study highlighted that the area has convenient access to amenities, including a shopping mall and bus stations. A survey of apartments within a 2-kilometer radius in the study showed that the rental prices were in the range between 4,000 to 7,000 Baht per month with an occupancy rate of range from 75% to 95%. Through the technical feasibility study, the location of the apartments in the study was indicated to be in the red zone of the city plan. With this law enforced for the red zone area, the construction of residential buildings was allowed to be built with 6 stories high and 58 rooms. The financial indicators show that the Net Present Value (NPV) is -6,654,168 Baht, the Profitability Index (PI) is 0.835, the Internal Rate of Return (IRR) is 3.98%, the Modified Internal Rate of Return (MIRR) is 4.71%, Switching Value Test of Benefit (SVTB) is -13.76, Switching Value Test of Investment (SVTIC) is -16.40%, and Switching Value Test of Operating Cost (SVTOC) is -46.04%. Using the assumption of 30% equity financing and 70% loandebt financing, the Weighted Average Cost of Capital (WACC) can be calculated as 5.63%. Based on these indicators, the study concludes that the investment in the construction of apartments in Mueang Rayong District, Rayong Province, is not financially viable.